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Unleashing the Asian Dragon: How China's Move to Vietnam is Shaking Up the Global Market
HANOI, April 25 - A year ago, Zhang Chundong helped his company break ground in Vietnam, part of a sweeping trend in which Chinese businesses left Trump's crosshairs and found solace in Vietnam's warm embrace. Now, managing a distributor of BYD forklifts, Zhang's dream of unstoppable growth has hit a wall, thanks to the specter of Trump's threatened tariffs.
"Some factories we've lined up were almost ready to roll, but the tariff news has put a halt on everything," Zhang, manager of Huochacha New Energy Group, lamented to AFP. "We should be in a stage of rapid expansion... but thanks to the tariffs, we're stagnating instead."
Despite the 46% tariff looming over their heads, many Chinese businesses in Vietnam still believe they've hit the jackpot. After all, they'd rather face a 10% tariff in Vietnam than up to 145% levies at home. But the shine is starting to wear off as factories halt, projects go on ice, and uncertainty festers.
In Vietnam's industrial hub of Bac Ninh province, business owners like Zhang express a mix of hope and worry. It's a nerve-wracking dance between optimism and anxiety, with every move, every step forward potentially brought to a grinding halt by Washington's tariff whims.
Zhang's confidence in the negotiations is underscored by three or four projects that are on hold. "I've talked with a few clients," he said, "and the answer at the moment is the same: we need to keep waiting."
A Rising Tiger
In Bac Ninh, Chinese businesses jostle for space with Korean competitors. South Korea has long been a significant player in Vietnam, with tech giants like Samsung and LG sharing the landscape. But China is quickly catching up.
By the end of 2023, around 10,000 Chinese expats had made Bac Ninh their home. Considering the rapid growth of Chinese businesses, this number has likely increased since. Wang Hongxin, a 40-year-old expat who's been in Vietnam for over a decade, explains, "In recent years, Vietnam's economy has been developing, and the trade friction between China and the U.S. has encouraged companies to move to Vietnam."
One such company is Vietnam Kepai, a Chinese manufacturer of computer numerical control machines. Fleeing intense competition at home, they expanded into Bac Ninh last month in search of new markets. Li Pingwu, the firm's 33-year-old manager, shares, "There are many companies that are successful in China hoping to explore the market in Vietnam. I've heard this conversation so many times in Chinese restaurants."
With investments in Vietnam increasing at an impressive rate, the country has become a formidable trading partner. In 2024, China ranked third among Vietnam's top investors, behind only Singapore and South Korea. Moreover, Chinese investments accounted for over a quarter of all new investment projects.
Chaos in the Workshops
Trump's announcement of gigantic tariffs on Vietnam in early April has sparked a frenzy of finger-pointing, with Washington accusing Vietnam of being a willing accomplice in China's export machinations, enabling it to skirt tariffs.
Although an IMF report from 2024 found "no clear evidence" of Vietnam's role in facilitating Chinese exports to the U.S., Zhang admitted he has noticed the practice. "Some of our clients—those selling floorboards or moulding machines—are doing entrepot trading," he said, meaning they're exporting products to the U.S. via Vietnam to circumvent tariffs.
Vietnam's trade ministry has ordered stringent customs checks to prevent breaches that could invite sanctions from trading partners. The tension has even affected worker schedules: Hung, a 30-year-old earning $270 a month at a Chinese company producing monitor parts, shared that he’s no longer working overtime. "I don't know how life will be now, as it's so hard to live here with what I earn," Hung confided.
Wang, who manages a Samsung supplier, confesses his unease, "We originally planned to upgrade some equipment for long-term development, but... because the investment will be quite big, we're hesitant now."
The global trade landscape is in flux, and it's clear that Vietnam is fighting to maintain its balance amidst the tumult. Caught between the U.S. and China, the nation must navigate the treacherous waters of trade tensions carefully to secure its future as an economic powerhouse.
- Despite the threat of tariffs, Chinese businesses in Vietnam, like Huochacha New Energy Group, still believe they have found a shelter from the storm, as a tariff in Vietnam is more manageable than the potential levies at home.
- International politics, exemplified by the trade wars between the U.S. and China, have encouraged businesses to seek growth opportunities in countries like Vietnam, which is experiencing a booming economy.
- The Vietnamese industrial hub of Bac Ninh province is seeing a surge of Chinese businesses trying to tap into new markets, making it increasingly competitive with established players like South Korea.
- Chinese companies, such as Vietnam Kepai, are expanding into Vietnam to circumvent the intense competition at home and to take advantage of the country's growing economy.
- The global economy, with the ongoing trade tensions, is experiencing rapid changes, and countries like Vietnam must carefully navigate these turbulent waters to secure their future as global trading partners.
- In the face of increasing tariffs and economic uncertainty, worker schedules and investment plans in Vietnam are being affected, as businesses are hesitant to make big investments or extend overtime work due to concerns over potential sanctions or financial instability.
